Eurozone Inflation, June 2024
Core inflation in the euro area eased to 2.5% in June, the European Union's statistics agency said on Tuesday, while closely watched core and service prints were flat.
The headline was in line with the expectations of economists polled by Reuters. In May, inflation rose two percentage points to 2.6%.
Core inflation, which excludes the volatile effects of energy, food, alcohol and tobacco, was 2.9% from the previous month, below the 2.8% forecast by economists.
Inflation rate of services was 4.1%.
Investors will now look to the latest data for the path of interest rates in the 20-nation euro zone, following the European Central Bank's initial 25 basis point cut in June.
Volatility in the consumer price index is expected to be longer this year as confusing fundamental effects from the energy market fade.
In June, energy inflation in the euro zone was 0.2% year-on-year, a sharp change from the previous year when the sector had a strong inflationary pull.
On Tuesday, ECB Vice President Luis de Guintos told CNBC's Annette Weisbach that while the central bank is confident inflation will reach its 2% target, the coming months will be a « flat road » and there is no « predetermined path. » Monetary policy. He was speaking on the sidelines of an ECB forum on central banking in Sintra, Portugal.
According to LSEG pricing data, money markets see high chances of another two interest rate trims of 25 basis points each at the ECB's remaining four meetings. There is only a 33% chance of a follow-up cut this month.
The euro, which has struggled in recent weeks under the shadow of political risk from the upcoming French elections, was slightly lower following the data release. It was down 0.2% against the US dollar and 0.05% against the British pound by 10:30am London time.
Ballinger Group's FX market analyst Kyle Chapman said that beyond a slight cooling in food prices – unprocessed food inflation eased to 1.4% from 1.8% – overall, the latest consumer price index was a « virtual repeat of the May data ».
« That's enough to give pause at this month's ECB meeting. Stickiness in services inflation could turn unemployment into a real concern for policymakers, » Chapman said in a note.
« There is no tangible decline in services inflation this year, and the ECB is unlikely to cut rates significantly until one emerges. »
The interest rate outlook will depend on quarterly ECB staff macroeconomic forecasts and whether they move higher, Chapman added.
In June, ECB staff raised their annual average inflation outlook for 2024 to 2.5% from 2.3%, and raised their 2025 forecast to 2.2% from 2%.
